Seattle Bubble

• Poll: Is it ethical for a home debtor to “walk away” from a mortgage?
• Poll: What’s your prediction for the King Co. SFH Median in 2008?
• Poll: What’s your February KC SFH Sales Prediction?
• Poll: How far will Seattle’s Case-Shiller HPI fall from the July ‘07 peak?
• Poll: You would like to buy a house in the next…

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16 responses so far ↓

• 1 Buceri // Apr 13, 2008 at 7:51 am

  400 units have been added since Friday morning (48 hours). I though April would end with 11500. At this pace, who knows.

• 2 topdog // Apr 13, 2008 at 9:08 am

  The inventory has been misleading recently. It used to clear expired, sold, etc. listings on a daily basis (which made the number more accurate on any given day), but it hasn’t been doing so this weekend, so the number is probably quite a bit inflated…

• 3 Groundhogday // Apr 13, 2008 at 4:49 pm

  In related news the Pullman, WA MLS is up to 177 listings now (condos, townhomes and single family). This is up from a high of just around 105 for last year, and the inventory has accelerating over the past few weeks with sales actually slowing. To my surprise we did get a little it of a spring bounce, but it seems to have started and faded much earlier than usual.

  Nonetheless, new listings are often outrageously high… we’ve seen several cases where this year’s listings are priced 20%+ over perfect comps from last year.

  But rest assured west siders, there was no bubble in Pullman. We are unique and special. Keep buying those homes and condos for your kids to live in while attending WSU. The more you buy, the more gets built, the greater the inventory oversupply, and the harder the market will fall on the down side.

• 4 FreedomLover // Apr 13, 2008 at 6:49 pm

  Ah, how delicious the fall will be!

• 5 Scotsman // Apr 13, 2008 at 10:50 pm

  Ooh, tough call. We could see 17,000+.

  Here’s my best guess though- there will be a lot of sellers who hold off on listing their homes in the hope the market will recover. Also, there will be pressure from neighbors, etc. to not list unless you really need to sell. Come Fall though the panic will set in and the gates will flood open.

  So my prediction is for slightly higher listings through the summer, but much higher than normal listings through the Fall and next Winter.

• 6 Matthew // Apr 14, 2008 at 4:38 am

  People taking their houses off the market and waiting for a bounce are truly the greater fools. What they should be doing is slashing prices and getting it off the market ASAP.

  Do people truly think this is going to be a quick turnaround? It amazes me that people aren’t paying attention to what is going on in every other metro area.

  I’m out here in DC right now and a former co-worker bought a townhouse that he has already taken a 120k hit on, and there is no recovery in sight. In many areas prices have already reverted to 2004 price levels and it looks like there is still major room down from here.

• 7 Buceri // Apr 14, 2008 at 8:57 am

  AP poll: More avoid buying homes

  By ALAN FRAM, Associated Press Writer1 hour, 52 minutes ago

  A growing majority say they won’t buy a home anytime soon, the latest sign of increasing pessimism about the nation’s housing crisis, a poll showed Monday.

  In a vivid sketch of how the sputtering real estate market is causing distress throughout the country, the Associated Press-AOL Money & Finance poll found that more than a quarter of homeowners worry their home will lose value over the next two years. Fully one in seven mortgage holders fear they won’t be able to make their monthly payments on time over the next six months.

  “This is a great time to buy, but not necessarily to sell,” said Robert Jackson, who lives in a two-bedroom house in Ferguson, Mo., with his wife and four young children. He said he would love to purchase a larger home, but can’t because even if he found a buyer, he would probably lose thousands on his house, which he bought less than two years ago.

  “We’re just going to have to slap a Band-Aid on it and stay here until the market gets a little bit better,” Jackson, 30, said in a follow-up interview.

• 8 Moe Ronn - Realitor® // Apr 14, 2008 at 9:15 am

  I’d like to know more about how lease/purchase options generally work. Sure, I understand the basics; you lease a house from the owner and agree that in some period of time you plan to purchase the home and get some credit for part of your rental payments. Plus, I’ve heard that banks often look at this arrangement positively when you finally go for the mortage, it’s like they see you as having somewhat proven your worth if you’ve stuck through the deal.

  I wonder if that might be a good way to get a foot in the door on a distressed property and given the current market state, I wonder if a much higher percentage of rental credit could be negtiated.

  One of the things I’m most curious about is how the final purchase price is set. If I entered an agreement now for a home that could possibly sell for $300K today doesn’t mean it will be worth that in 2 or 3 years. How does that typically work?

  And, no offense Ron, but I don’t want your opinion on this. You’re way too positive about GEMS and I’ve read your brags about how much you make on those deals. Plus, I don’t believe that I would enter an agreement unless the landlord was responsible for routine repairs during the “lease” portion of the deal. I think it’s BS that the tentant has to take all the responsibility. The tenant doesn’t own the asset until there is an actual sales agreement. Until then, he’s still a tenant and should be protected by the usual laws.

• 9 matthew // Apr 14, 2008 at 10:36 am

  Band-Aid on a bazooka hole.

• 10 Sandy // Apr 14, 2008 at 10:39 am

  Moe Ronn–I wrote a post about lease-options about a year ago on my home blog (not the PI) and my take on them at the time was that they were risky for both parties. However now that the market has changed I am not so sure. Kind of depends on the situation though.

  My thought previously was that about the only time you would ever see them was when you had a buyer who couldn’t qualify to buy a home (through bad credit or whatever) and a seller who couldn’t sell their home for asking price. Basically, bad credit buyers buying overpriced homes. My thinking on these is now that I think the seller who agrees to a lease option probably still has an overpriced home, but if the buyer is in good shape there can be some benefits for them.

  The major downside to the buyer now is that they are going to be setting the selling price a year or so before actually buying the home. The obvious problem with this is that we don’t really know where the market is going to be in a year. If it’s up, then the buyer is getting a good deal. If it goes down that’s going to be a problem. They can get out of the contract, most likely, but in order to get a seller to agree to one of these, the buyer will have to put down a an earnest money deposit that is (usually) at least twice what they would need to put down simply to lease without the purchase option. So, if at the end of the lease period the buyer comes to feel that the purchase price is too high, many will choose to opt out of the contract and walk away from that money.

  A lot of investors who are offering lease option purchases are banking on this happening–because think about it, they get not only your rent for the year but a deposit that is twice what they normally would be able to collect, and they get to keep it if the buyer walks. This can make the difference between cash flow, and not, on some properties.

• 11 Moe Ronn - Realitor® // Apr 14, 2008 at 4:33 pm

  Sandy, thanks for your input. I was wondering how and when the purchase price was set in such a scenario. Of course, I feel that the market has a long, long way to fall before it sees the bottom. Ergo, it would be foolish to agree a property at say $300K when it might be only valued at $250K (or less, much less) when the option is about to expire.

  However, given the current state of the market, perhaps a seller would agree to a contingency that the actual purchase price is to be renegotiated at the then market value based on comps, etc. By this time next year there might be some really desperate folks out there just trying to slow their bleeding.

• 12 B&W Nikes // Apr 14, 2008 at 7:37 pm

  I think the combined total will top 20k easily. How about for condos? I see much more interesting times ahead there. And for the closer in areas that will probably lead to an equally interesting effect on small home prices.

• 13 Jillayne Schlicke // Apr 14, 2008 at 9:02 pm

  I am one of the lone 4 so far who has guessed over 19,000.

  I feel some bank failures coming our way.

• 14 Alan // Apr 14, 2008 at 9:53 pm

  Call the peak last year 12,000.

  Estimate the percentage increase YOY based on current increases (hint: 30-40%).

  12k * 1.35 = 16200

  13k => 8% increase
  15k => 25% increase
  18k => 50% increase
  20k => 67% increase

  We did see 70% a few months ago. It isn’t out of the realm of possibility.

• 15 Ira Sacharoff // Apr 15, 2008 at 9:19 am

  I was thinking the upper 17,000’s, so I’m not far off from Jillayne’s.

• 16 Alan // Apr 15, 2008 at 12:58 pm

  If you graph the inventory Tim is recording, it looks very linear (constant velocity) from the beginning of the year. If you extend the linear trend, we will be at 14,000 in July. The peak inventory last year was in September. The linear trend predicts just under 17000 in September.

  On the other hand, there is a faint hint that inventory may be accelerating, but I don’t think there is not enough data to really support that.

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